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Retirement Advice
Draw up a plan of how you are going to accumulate enough money to retire early.
To receive an income of £20,000 in retirement, you will need to have accumulated at least £400,000 to £500,000 in savings.
For every year you retire early, your income from a final salary pension scheme declines by between 6 and 8 per cent.
To retire five years early, you will need to save between 13 and 20 per cent of your salary a year.
Do not rely on pensions to provide retirement income. Construct a diversified portfolio of investments, including ISAs, unit trusts and property.
Think about selling your home on retirement and buying a cheaper house. The profit can go towards funding your retirement income.
Check that your pension policies allow you to draw an income early.
Consider buying an inflation-linked annuity. People who retire early have a life expectancy of another 20 to 30 years, which is a long time for inflation to eat into your income.
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Ways to avoid IHT
Sorting out your finances in preparation for retirement should also include a detailed look at the issue of inheritance tax and, more specifically, how to avoid it. With property prices rocketing over the past few years, more and more people are needlessly falling foul of the IHT trap. Here are a few options for you to consider.
The whole-of-life second death placed under trust
Advantages: The sum assured pays out on the death of the last spouse, is outside the estate and will pay a lump sum to the beneficiary to pay potential IHT bill.
Disadvantages Cost premiums can be expensive. The sum assured reflects the potential IHT bill at a moment in time and may change. Also the whole-of-life may not perform to the level required.
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